Monday, September 26, 2011

9 Tips For A Successful Chapter 13

Over the past year or so, Florida has seen a glut of foreclosure filings, many times involving mortgagees that are simply not willing to bend to do what really needs to be done to keep you in your house. This has funneled homeowners either into surrendering their house and filing a Chapter 7 bankruptcy, or for those with regular income wanting to keep their house, into a Chapter 13 bankruptcy. Also, those with regular incomes, two or more mortgages, with house values that are less than the principle balance of their first mortgage, Chapter 13 may allow one or more mortgages to be eligible for a cram-down.

Recently, bankruptcy filings have fallen off. Maybe the economy is starting to do better. Maybe its just the time of the year, as bankruptcies typically fall off during certain months of the year anyway. There is talk of a second dip in the economy, which may lead to more reductions in pay to the employed, and more businesses closing, leaving more people out of work.

For those wishing to try to keep their home by filing a Chapter 13 bankruptcy, this blog is for you. Hopefully the following tips you will find useful, and lead to a successful completion of your bankruptcy.
  1. Preparation. Success with a Chapter 13 takes planning, as they are not cookie cutter events. Every Chapter 13 bankruptcy is unique. There is a lot of information on the internet about not only Chapter 13 bankruptcies, but debt relief in general. An excellent source of information about Chapter 13 bankruptcies can be found at the Doing your homework before proceeding to an attorney's office can greatly enhance your chances of making correct decisions towards the planning and implementation of your bankruptcy. These decisions can have a direct impact on your chances of successfully completing the bankruptcy, and your quality of life during your bankruptcy, which typically last from 3 to 5 years.
  2. Budget. Budget. Budget. Your bankruptcy is centered around your living expenses, and your living expenses may help determine whether a Chapter 13 bankruptcy is feasible. One of the problems people run into when filing bankruptcy is having not properly accounted for all necessary living expenses at the outset. This will determine how much money you will be able to repay, and your realistic expectations of success in the bankruptcy.
  3. Payroll Deductions. During your Chapter 13 bankruptcy, depending on the jurisdiction you are filing in, you may need to turn over your tax refund money to the Trustee. If you plan ahead of time, you can hopefully minimize any tax refund, thereby putting more money into your pay check. One major change you will experience is that you will not have the advantage of being able to depend on receiving a tax refund during the bankruptcy.
  4. Organize Documents. Your attorney will be asking for a lot of documents. Some attorneys place this list on their website, while others have the list in their office. A typical list will include deeds, mortgages, vehicle titles or registration, pay advices for 7 months, financial accounts for 7 months, 12 months evidence of any cash advances, and 4 years of tax returns. Should you not have your tax returns, you should be able to order a transcript by filing out Form 4506-T. You will also need payoff figures for all secured debts, together with how many payments you have left if less than 5 years.
  5. Don't Hide Anything. As long as your attorney knows of everything about your assets, transactions, debts, income, and expenses, he or she should be able to plan accordingly. I have run into horror stories that have ended up costing my clients a lot of money because of either hiding things or misstating the truth. If your attorney doesn't know the truth, he or she may not be able to help you when things start heading South.
  6. Arrange Filing Date With Your Finances. There is a 14 day window in which to file your Plan after the filing of the bankruptcy. The Plan is a document, after approved by the Court through a process called Confirmation, that outlines what moneys will be paid to the Trustee, and how the Trustee will distribute the funds. The initial payment is due 30 days after filing.
  7. Pay Without Receiving Bill. When you file bankruptcy, because of something called an Automatic Stay, you will probably stop receiving bills for things you are accustom to paying only after receiving a bill. For example, if you normally receive a statement on leased property, and then send in your payment, you should contact the leasing company and find out where to send the payment while in bankruptcy, and mail it in. Why does the company stop sending statements? They are afraid this could be construed as a collection effort, which has consequences while in bankruptcy with the automatic stay in place. Also, according to your plan, there are some payments that you may be making directly to a creditor. Make sure the payments are timely made.
  8. Miss Work!. OK, that's a little strong. But you will have to attend a meeting with your attorney and the trustee after filing. It typically takes about 5 minutes, and is assigned to a 30 minute time slot, along with some other bankruptcy filers. You will receive the date and time of this meeting shortly after filing, and is referred to as a 341 Meeting or Meeting of Creditors. I really don't like the name Meeting of Creditors because, while creditors can attend, it is unusual. A more descriptive name would be something like Meeting With Trustee. Along with the notice containing the date and time of the 341 Meeting will be a time and date for a Confirmation Hearing. Check with your attorney to see if you.
  9. Discipline. That's right, now for the hard stuff, unless you are disciplined to stick with the Plan, and a budget according to the papers filed with the Court. The more disciplined you are, the easier it will be. Few people find it easy to successfully complete a Chapter 13 Plan and receive a Discharge. Should things not go as planned, get with your attorney right away, as there may be things he or she can do through the Trustee or the Court to increase your chances of success considering your new circumstances.


  1. Hi Grange! Thanks for such an insightful post! Though all the 9 tips are important, I especially liked the 5th one that asks the petitioners not to hide anything. Yes, since I'm also going to file Chapter 13 soon and have taken help from an attorney, he told me the same thing on my first visit to him. And if someone hides something, he/she would be conducting a bankruptcy fraud and might face severe legal penalties.

    1. Thanks for the reply. You are already ahead of the game (hopefully) by seeking out the advise of an attorney. You would be amazed at how many people try to do a Chapter 13 on their own, and the problems they run into; some of the problems people create are difficult for an attorney to correct.

      Thanks again for the feedback. Good Luck on you Bankruptcy.

  2. Staying with your budget is the most important thing to keep in mind. Grange, I'm really happy that I found these tips. I'm working on helping my sister get out of debt. I think bankruptcy will be her only option at this point.
    Celine |

    1. Thanks for the feedback. I would highly suggest seeking the advise of a competent bankruptcy attorney in your area. You should be able to find someone that offers free consultations. In seeking out an attorney, asking how long they have been doing bankruptcy, and what bankruptcy related professional organizations they are a member of, should help. Some of the professional organizations include local bankruptcy associations (if there is one in your area), National Association of Consumer Bankruptcy Attorneys, and the American Bankruptcy Institute.

      Good Luck

  3. Great advice! The trick is a combination of determination and a working game plan to anchor all your efforts and your will to get through a case of bankruptcy. It doesn't hurt to run through various opinions and advice as well, just so you can be sure you've got the best way forward. Thanks for sharing!

    Portia Douglas @ The Bankruptcy Legal Services

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  8. Yeah, this is really useful post. Nobody wants to lose their home, filing a bankruptcy might be a negative impact to your credit history. This is not the end of the road. The tips here are great, knowing the whole process can help you to decide better what to do next by talking to your local bankruptcy attorney to your area.

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